Sector Report

Japan technology – Coming back

by Yu Yoshida / Dec 9, 2019

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Another new big wave into 2021
The semiconductor inventory cycle is suggesting fundamentals have started to bottom out. We forecast rebounding memory investment to support wafer fab equipment (WFE) market growth to US$63bn in 2021, another historical high.

5G is the key driver
We believe the rollout of 5G services and the hyperscale data-centre capital investment cycle point to considerably better demand conditions for memory in 2021 and see this supporting a solid recovery for WFE investment. We also expect an upturn for front-end process semiconductor production equipment (SPE) to be followed by a rebound for back-end process SPE. We expect 5G services to create upgrade demand for DRAM testing systems and new demand for system-on-chip (SoC) testing systems. We forecast overall testing system demand to expand to a record-high US$4.05bn in 2021. We also expect higher unit pricing to take growth for extreme ultraviolet (EUV) mask blanks beyond that for the installed base of EUV lithography systems.

Risks
Potential positive risks include expanding demand for smartphones and servers and tighter supply of memory. Possible negative risks include intensifying US-China trade friction and rising uncertainty ahead of the US presidential election.